Economist Yeoh Lam Keong took to Facebook on Sunday (20 September) to commend Progress Singapore Party Non-Constituency MP Hazel Poa for her “excellent” maiden policy speech in Parliament recently.
The former GIC Chief Economist is all praise for two policy measures that Ms Poa suggested—the first on unemployment credit system in the country and the second on CPF Life payments.
“Hazel proposed two good policy measures for consideration: an unemployment credit system that allows borrowing to cover unemployment needs and indexing CPF life payments against inflation using public funds rather than individual saving,” said the economist.
He also congratulated the opposition for “bringing up concrete constructive policy reforms that give some real teeth to lip service about a more compassionate and inclusive society”.
Mr Yeoh went on to explain that inflation indexation of retirement payouts is really “important retirement adequacy reform”, and it is standard in most developed countries.
“Given growing longevity, retirement time periods for many can be in excess of 20 years, and nominal payouts can easily lose more than half their real value over the retirement horizon,” he noted.
He added, “To compensate for this CPF offers a basic 2% inflation indexation for payouts but only if you accept a payout some 20-23% lower.”
However, this could not be the best option for individuals who rely heavily on their CPF Life payouts for retire income. This is because they will either have insufficient retirement funds or they will be moved to absolute poverty until they will not be able to make base needs over their retirement years.
“While those on the more affordable basic plan receive more favorable interest rates, the payout amounts fall far short of what is needed for a dignified coverage of basic retirement needs. This is designed to make sure pooled savings can fund all existing payout schemes.”
Mr Yeoh stated that using general fiscal resources to finance retirement as opposed to purely relying on pooled individual funds should be seriously considered, especially for the poor and middle income groups. This is as Singapore has adequate fiscal resources to do this “intelligently”, the economist noted.
“Individually pooled safety nets while good, are simply insufficient in a number of key areas,” Mr Yeoh expressed.
He continued, “The unemployment credit system together with a basic risk pooled unemployment insurance system has been suggested over 10 years ago both by internal government studies and a REACH (government feedback unit) study team led by Prof Hui Wemg Tat, Donald Low and I. Nothing has come out if these recommendations since.”
“The poor, who often can afford very little cash precautionary savings and have unstable gig like jobs like in this Covid unemployment crisis, are most in need of this.”
If that’s not all, Mr Yeoh also pointed out that to protect the poor’s CPF savings, a system like this should be “limited to borrowing 3 months wages capped at a maximum amount and require gradual repayment upon re-employment”.
Additionally, a dominant part of such payouts for the poor should also be subsidised on a “means tested basis”.
“Again, these unemployment subsidies to the poor should come from the public purse, not just from the savings of the poor themselves.
“The broader point is that not just risk-pooled or individual money but also state resources in appropriate combination is needed for effective and sustainable social safety nets,” the economist concluded.
At the end of his post, Mr Yeoh also complimented Ms Poa for “bravely and thoughtfully standing up for the underprivileged” in her parliamentary debut.
Edit: This article has been amended to reflect edits on Mr Yeoh’s Facebook post